Can ChatGPT Replace Your Financial Advisor? PART 1
Today we’re gonna put a hypothetical retirement planning case study into ChatGPT with all the parameters like I normally do. I’m 60 with 1.5 million, here’s my social security, how much I wanna spend, and we’re gonna see if it can actually produce a quality output or if I’m gonna be able to poke some holes into it.
So the reason I want to do this video is because I was golfing with a buddy of mine about six months ago, and we got into a discussion about AI, about some of the cool things that it can do, and he, about 10 minutes into the discussion, he said, Troy, I gotta tell you something.
He says, I used ChatGPT to create my own retirement plan. I put my wife and I’s savings, I put how much we wanna spend, I put some of the goals in, where we wanna live, and it produced me a quality retirement plan. So I didn’t go too much into great detail with them, but I want to do this with you today, just off the cuff, no preparation. I don’t quite know what to expect here. Well, I do have an idea of what to expect, but this is going through live for the first time with you.
Nothing is pre-rehearsed. This is just, you’re going to see it as I’m going through this and we’re going to share this journey together.
The Prompt Given to ChatGPT
So we’re going to start with a basic prompt here that somebody may enter if they are thinking about using ChatGPT to build their own retirement plan.
So I’m gonna read through with you and then we’re just gonna get to work.
“I want you to create a comprehensive retirement plan focused on generating income, good growth without a lot of risk, minimizing taxes, protecting for long-term care, and I’d like to make sure my two kids inherit at least $500,000 each. My wife and I are both 60 years old. She has been retired for many years and I am retiring in two months at 67, my social security is 3,000 per month. Her social security then will be 800 per month. I have 1.2 million in my 401k. We have 200,000 in a CD paying 4%, 50,000 in savings, and 50,000 in a brokerage account. Our spending goal is 100,000 per year after taxes, but not sure if that’s too high or too low. My two biggest concerns are taxes and healthcare, and I also want to make sure that we don’t run out of money. I expect to live to around 88. That’s when my dad died, and my wife could make it into her 90s as both her parents are still alive. Should I do any Roth conversions? If so, how much and when? From which accounts should I withdraw money from? And when should I take Social Security? I’m leaning towards taking it sooner than later.”
So this is something that I presume would be a prompt that if you’re in this position and you wanted to work with ChatGPT, this would maybe be similar to what you input. So we’re going to process the request and see what it comes up with and go from there.
ChatGPT’s Retirement Plan Overview
Okay, so it looks like they have a lot of the bases covered here as far as some of the core planning domains of retirement, and we’re going go into them kind of one by one.
Okay, so your current position, it’s essentially an inventory of assets and income that we have provided, as well as the spending goal here, $100,000 per year after tax. And it says, let’s assume you need 115 to 120 gross to net $100,000 after taxes. Then the big question, can you retire? How much income to pull out? So can you sustain $100,000 a year? Life expectancy summary, portfolio summary, your basic 4% withdrawal rate is $60,000 a year.
So then it’s breaking down before Social Security, how much you would need from your investments, and then after Social Security, how much you’ll need from your investments. And then it’s saying it’s very manageable with disciplined tax planning.
The Social Security Question
When to take Social Security?
Here’s the big question.
We receive this question all the time, and if you have $500,000 or $5 million, Social Security is a hot button for almost everyone that we talk to. So this makes a lot of sense. It is a permanent lifetime reduction if you take it early. So at age 62, it would be a reduction from that age 67 benefit. And here it’s saying it may actually be better, or why delaying may be better in your case.
So it’s really kind of giving you some education around why it may be better. And then of course at 70, if you defer it to its maximum timeframe, it jumps from 3,000 a month to around 3,700 to 3,800 a month. So it’s giving us options here. So there’s a strong planning case for you deferring till age 70 and then the wife taking it at age 67.
Withdrawal Strategy and Income Planning
Withdrawal strategy.
So from age 60 to 67, we’re in a low income window before social security kicks on and RMDs kick on. The withdrawal order. So this is the order from which we are going to withdraw from our account.
So from age 60 to 67, we’re gonna use the CD, the brokerage account and savings, controlled 401k withdrawals to fill tax brackets and perform some Roth conversions. From 62 to 75, live on Social Security, continue Roth conversions, keep income below IRMA Medicare threshold. So IRMA stands for income related monthly adjustment amount. It is a Medicare surcharge. And if you’re married filing jointly, once you exceed certain levels of income, your Medicare premiums go up substantially.
So it’s telling you to stay below those thresholds.
The Three Phases of Retirement Planning
Then phase three, 75 plus, RMDs begin. Much of the 401k has been converted. Taxes are controlled at that point. Survivorship is protected.
Okay, so I really like this.
This is very similar to what we would do as far as breaking this down into phases. So there really are three distinct phases of this particular retirement plan and many retirement plans. You have phase one before Social Security begins where income is primarily coming from your assets. Phase two runs from full retirement age through the beginning of required minimum distributions.
And phase three begins when RMDs start and tax flexibility becomes more limited.
Roth Conversion Strategy
Roth conversion strategy.
So you are ideal candidates for Roth conversions.
Right now, no Social Security, no RMDs, you’re in low tax brackets, your 401k is large relative to your other assets.
It points out the concerns or considerations if you do not do Roth conversions.
If you follow this channel a lot, we have tons of videos as you know.
One of the biggest things we do for clients is tax planning.
Investment Allocation and Risk
Investment allocation. Again, it’s covering the key planning domains. So we have risk management, taxes, income, healthcare.
You need growth, but controlled volatility. 50 to 60 percent diversified equities. 35 to 45 percent fixed income. Then a 5 percent cash buffer.
This is fairly standard modern portfolio theory.
Legacy Goal and Inheritance Planning
The legacy goal to ensure $500,000 per child. Based on market returns, long term care costs, and tax efficiency, it’s projecting somewhere between $800,000 and $1.5 million in inheritance. It also highlights risks like long term care costs, tax inefficiencies, and Social Security timing.
What Happens Next
What do you think about the plan? Are there any areas that you noticed maybe a little bit off? Things that ChatGPT overlooked?
What questions would you ask ChatGPT from this point forward? Put those into the comments below.
I want to turn this into a multiple video series where we get feedback from you and dive deeper into the questions that come up. In the next video, we’re going to start scrutinizing this retirement plan and see where the logic may begin to break down.
➡️ If you’re nearing retirement and wondering whether your assets can support your desired lifestyle, this type of structured income analysis can provide clarity. We can help you create a retirement life plan customized for your retirement vision and legacy. Call us at (877) 404-0177 or fill out this form for a free visit: https://click2retire.com/chatgpt-retirement-pt-1
